Nice Suit And Empty Pocket Economics

( April 23, 2014, Colombo, Sri Lanka Guardian) Many were the glorious predications made about 2014 for Sri Lanka in newspapers and TV during the festive days. One that impressed me most was on economics by a dapper figure from the Central Bank. Reading out in fluent Sinhala – what appeared to be complicated economics (Sinhalanomics?) to ignoramuses like us – the speaker created the correct patriotic fervor for the Avuruddha.

The Dala Deshiya Nishpadanaya (Gross Domestic Product – GDP) was 7.5 per cent was the highest in South Asia or even in the world. Uddhamanaya ( inflation) was down to single digit. Foreign Exchange Reserves were on the up, growth in industrial and agricultural was rosy…….. In fact everythings in the Sri Lankan Garden in this Avurudhu Samaya (New Year season) was abloom.

It created the right ‘ambience’ – as architects say to impress clients. But who were the Central Banker’s clientele?

Ambience

Yes, the ambience appeared to be there for us to sit down forkiributh, kavun, kolikuttu, etc, etc. but something seemed to be amiss. Having none to discuss these economic developments at home that day, we journeyed to our waterhole for further elucidation but found the vast expanse deserted. Only the waiter, Hondadasa, smiling broadly as usual and barkeeper Sinaiah (behind the bar) were there.

What no New Year? Where are the members?

Sinaiah muttered: I think….. bad times. Many bar bills not paid.

This was contrary to the rosy Central Bank predictions. If there is any prosperity in the country, the surest indication is a splurge at the bar, unless of course all the club habituals had been suddenly converted to the Mahinda Chintanaya by Carlo Fonseka.

Village wisdom

We had a discussion with Hondadasa, the village lad who knew not only his onions but potatoes, cabbages, chillies, etc. but was now an expert on the gentle art of collecting tips. We queried him on the state of the economy of Lanka and whether he had seen on TV an address by a Central Banker, the previous night?

It was ‘Nice suit-empty pocket speech’, Sir, was his verdict.

Hondadasa explained: The gentleman was in nice suit and ‘tie-pie’ and said we were all very well off like in South Korea, Taiwan and Hong Kong. But we in Lanka have no money in the pocket. Cost of living is sky high, he said looking towards the heavens.

Sir, that speaker claimed that Uddamanaya (inflation) had gone down but the price of everything has gone up, Hondadasa complained.

We gave him the benefit of our elementary knowledge of economics.

Statistics

When they say Uddamanaya has gone down, it does not mean the price of commodities is down. It only means that if between 2011 to 2012 (say) the rate of increase in price of parrippu was 10 per cent and between 2012 and 2013 the rate of increase was only 5 per cent, inflation had gone down by 5 percent.

But still there is a five per cent increase in prices in real terms, which I will have to pocket out, the smart Hondadasa was quick to point out.

He went further: If the rate of increase in taxi fares for 2011- 2012 (say) was 10 per cent from Rs 50 to Rs 60 per km and between 2012 and 2013 rate of increase was 5 per cent, from Rs 60 to Rs 65, the taxi driver can argue that the rate of increase (Uddamanaya) inflation has come down but I have to pay 5 bucks more per km. Why don’t they simply tells us that there had been a price hike of Rs 5 per km?

Hondadasa was still a rustic to economics.

My dear fellow, there is a saying called: Lies, damn lies and statistics. In this ‘digital age’, it’s the thing that keeps the economic world going round and around. Besides what would the future of those like Central Bankers be, if you say that prices have gone up? It’s a far, far better thing for the country, government and the dapper Bankers to say, inflation has been brought down rather than say prices have gone up.

Had they kept saying prices have gone up each day, they would have been sent out of the solar system a long time ago by their political patrons.

GDP

Hondadasa wanted to know what’s this Dhala Deshiya Nishpadanaya (GDP) is all about. Aren’t we world leaders, he asked. That’s the index of growth of national economies.

One can take it seriously or ignore it depending on your line of argument. India has the second biggest GDP next to China but now poor Manmohan Singh, the Indian PM is losing the elections.

We can add housemaids’ incomes, incomes of those in armed services, money spent on arms, trees felled, liquor and cigarettes produced, tourist hotels and can come up with a glorious GDP.

In India there are ’Maoist’ riots to overthrow the capitalist system even while the parliamentary elections are on. Sri Lanka’s GDP in 2013 according to pro government publications was 7.2 per cent in 2013.

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